Risk Classification Was All Wrong | Oklahoma Structured Settlements

by Structured Settlement Watchdog®

Robert Risk, the scion to lawyer Richard B. Risk Jr.'s Tulsa "structured settlement empire", displayed the following "pearls" on the website of Structured Settlement Services LLC  captured under the heading "Structured Settlement Basis"  [at time of original publication]

"A structured settlement for workers’ compensation or physical injury tort claims is a special provision under the Internal Revenue Code [Secs. 104(a)(1) and (2), respectively] that exempts all payments from current year income taxation, whether received as a lump sum or over a period of time. If the entire settlement is taken as a cash lump sum, that amount is excluded from current year taxable income, but the first dollar earned on the award becomes a taxable event" -

Why Robert Risk and Structured Settlement Services LLC Got it Wrong

1. Let's get down to the "basics". There is no "basis" to what Risk published.
2. A structured settlement IS NOT defined in Internal Revenue Code Section 104.  The only definition appears at IRC 5891.
   
3. Simply earning money on a cash lump sum award is not in of itself a taxable event. A "taxable event" is the term used to define an occurrence which affects the liability of a person to tax. If you invest $100,000 in a CD that pays interest the receipt of interest is a taxable event when the interest is paid.   But for example if one invests in a personal residence in Tulsa Oklahoma for $225,000 of the award and 15 years later you are still living and enjoying the same house, no taxable event has occurred.  If you move out and begin to draw rental income that is a taxable event. If you sell it is a taxable event. Even if your selling price is less than your purchase rice the event may trigger state or local transfer fees or taxes.
   
4. Other examples of taxable events:  (i) withdrawing money out of a retirement plan and then exceeding the time limit to roll it over into a new retirement plan; defaulting on a mortgage; benefiting from loan forgiveness; converting a traditional IRA to a Roth IRA

Said Robert Risk  of Structured Settlement Services, LLC:

"If the total settlement amount is taken as a cash lump sum, the growth from an investment will be subject to federal and state income taxes, which reduces the net performance of the investment by the marginal tax rates, which can approach 50%".

Why Robert Risk and Structured Settlement Services LLC Got It Wrong

1. The total settlement amount is the amount before the attorneys take their cut  
2. Robert Risk misleads the reader by failing to account for tax treatment of municipal bonds under IRC 103.
3. Robert Risk misleads the reader by omitting capital gains from his analysis.Only short term capital gains are taxed at ordinary income tax rates. Short term capital gains are those investments that are held for a year or less before being sold. Long-term capital gains, which apply to assets held for more than one year, are taxed at a lower rate than short-term gains. The maximum long term capital gains rate was 15% in 2010.  Based on this point alone those who work with Risk should be checking his math.
4. The net investment performance is the amount left over after deductions for investment management fees, tax and other costs have been taken away.  Net investment performance allows for both gains (positive) and losses (negative), depending on actual investment performance.

There is no excuse for the inability of any settlement professional to articulate the BASICS.

This  "Lab-a -oscopy" brought to you by someone who believes financial literacy really "mutt-ers"  in the structured settlement profession.

 

Comments

[John Darer]

"Carry Okie" Karaoke

[Jodi]

lol whats with the rockstar .gif?